Goldman Sachs is strongly optimistic that the U.S. stock markets and economy are primed for years of growth, sparked in large part by significant developments in America’s natural gas production.
Michael Stenger, an investment adviser and regional director with Goldman Sachs Group Inc., said Monday that the United States has added 1.8 million jobs related to natural gas development over the last five years, and expects another 3 million jobs to be added in the next seven years.
“We see a renaissance occurring here in the United States, which we haven’t seen since the ’50s with the beginning of the manufacturing boom in this country. As a result of this, we turned very long-term bullish in our views on the stock market,” he said.
Mr. Stenger was in Toledo on Monday to speak to the Rotary Club of Toledo. He said Goldman Sachs is projecting the S&P 500 to gain 7 to 9 percent from Friday’s close to the end of the year, and another 9 to 11 percent in 2015.
The market gained about 50 percent over the last two years. However, unlike the recent gains — which Mr. Stenger said were broad and largely undiscerning — Goldman Sachs expects more winners and losers in individual stocks going forward.
“Earnings growth, which didn’t matter for the past two years, we think will become the No. 1 catalyst for individual stock performance,” he said.
While Mr. Stenger said an improving real estate market will help the economy, it’s natural gas and the prospect of American energy independence that have him really excited.
Goldman Sachs believes the United States will become energy independent on oil by 2018. The country has already reached that milestone on natural gas, which is a cheaper and cleaner fuel.
“It is 25 percent the cost of oil,” Mr. Stenger said. “We just don’t use enough of it. In the next 10 to 15 years, we’re going to see a much broader reincorporation of natural gas.”
He expects to see more use of natural gas in motor fleets, more manufacturing industry locating near natural gas facilities, and more use of natural gas in electricity generation. Further, while President Obama’s administration has not been a friend to coal, Mr. Stenger believes the administration recognizes the benefits of embracing natural gas.
In the economy as a whole, Goldman Sachs sees the trade deficit narrowing and the unemployment rate dropping for the next five to seven years. While Mr. Stenger acknowledged that the unemployment picture is bleaker than the 6.6 percent rate that the government officially publishes, he said things are improving.
“We think you’re going to see more and more jobs added. The January number, they only added 100,000 jobs. People get very nervous about that. In our opinion, that was an anomaly. We think as the year continues to wear on, that’s going to pick up as the U.S. economy continues to improve,” he said in an interview after his presentation.
Goldman Sachs is forecasting 5.4 percent unemployment by the end of 2016.